Consumer advocates issue major warning as ASIC extends regulatory holiday to businesses selling loans and general insurance.
CHOICE and Financial Rights Legal Centre are warning that the Australian Securities and Investments Commission (ASIC)’s decision to wind back consumer protections as part of an attempt to foster innovation in the finance sector will leave consumers at risk.
With just two weeks until Christmas as consumers are distracted by tinsel and festive jingles, the financial regulator ASIC has taken the bizarre step of giving some of the country’s highest risk sectors a regulatory holiday.
Under ASIC’s new fintech licensing exemption scheme new finance companies selling financial advice, credit and some insurance are free to operate without a license for 12 months.
Quotes attributable to Erin Turner, Acting Director of Campaigns and Communications, CHOICE
“This is like dropping a great white in a kiddies paddling pool and sending the lifeguard home for a kip”
“If you want to start a new business flogging financial advice, personal loans or general insurance – bingo! You can raffle up to $1 million of punters’ savings with limited restrictions for 12 months.”
“Internationally, this approach from ASIC is an anomaly. The United Kingdom, Singapore and Hong Kong all assess applicants for regulatory exemptions to, at minimum, make sure they won’t harm consumers. ASIC won’t be doing the work – new businesses won’t need to apply to operate unlicensed. They’ll just have to send ASIC a note.”
“The UK, Singapore and Hong Kong understand the importance of innovation just as much as Australia. But they also understand the need to innovate and protect consumers at the same time.”
Quotes attributable to Kat Lane, Acting Coordinator, Financial Rights Legal Centre
“Instead of encouraging innovation, ASIC’s sandbox initiative is an invitation to shonks and sharks to rip-off consumers.”
“ASIC needs to ensure that there is an easily accessible searchable database of these fintech sharks so every consumer can know who to run screaming from.”
“Let’s call this what it is – deregulation by stealth. There is no requirement that unlicensed businesses must offer anything innovative or offer a service that is beneficial for consumers.”
“There is no question. This change will hurt consumers. ASIC has released report after report this year showing major issues with how credit and insurance is sold and it’s still cleaning up the mess from major financial advice disasters. In this environment, why would anyone write a blank cheque to let new businesses operate without oversight for 12 months?”